Recent findings from a state report highlight the need for greater transparency regarding Texas’s expenditures on temporary housing for foster children and the financial activities of private contractors involved in foster care services. The Legislative Budget Board’s 2026 Strategic Fiscal Review indicated that the Texas Department of Family and Protective Services (DFPS) could enhance its financial reporting in these critical areas, although no misspending of state funds was suggested.
The report emphasizes that insufficient expenditure data hampers lawmakers’ ability to evaluate whether the state’s foster care spending is justified. With nearly a decade of foster care privatization efforts underway, the performance of this system is poised to be a focal point for lawmakers in the upcoming year, particularly following the dismissal of the state’s largest foster care contractor and ongoing litigation aimed at resolving a longstanding federal lawsuit over foster care conditions.
Building Future Families, an advocacy group in North Texas supporting foster and adoptive parents, expressed concerns regarding the lack of transparency and oversight in spending practices of child-placing agencies, as reflected in the LBB’s findings.
The state has made strides in reducing the number of children without immediate placements, decreasing from approximately 90 nightly in 2022 to under 15 this year. However, the costs associated with temporary housing remain significant. Each placement incurs expenses for accommodations like hotel rooms, staff overtime, security, nursing services, as well as food and travel, along with temporary contracts, sometimes involving psychiatric facilities.
Despite a notable drop in the average daily population of children without placements, the financial burden of overseeing these cases is substantial. The report noted that DFPS lacks regular reporting mechanisms to clarify how these costs relate to the number of children in such situations.
Since 2022, the state has incurred around $150 million in costs for temporary placements, with only $35.6 million funded by the federal government. Additionally, the Legislature allocated $146.7 million for emergency housing efforts, according to the report.
Moreover, the state has invested hundreds of millions in private foster care contractors since 2017, when the transition of foster care placement and management roles began. Notably, the initial legislation establishing Single-Source Continuum Contractors (SSCCs) did not mandate expenditure reporting.
This lack of reporting complicates legislative oversight of SSCC financial activities. The report highlighted that as of November 2025, DFPS reported a total value of $1.34 billion for its five major multi-year contracts with SSCCs.
The state assigns SSCCs to specific multi-county regions to keep abused children close to their schools and families. These contractors are responsible for placing children in homes, providing necessary services, and supporting biological parents in improving their home environments to regain custody. Currently, more than half of Texas’s foster care children are managed by these private entities.
The transition to private contractors has yielded mixed outcomes. DFPS, alongside other state health agencies, is currently undergoing a rare Sunset review, which will likely prompt significant legislative scrutiny of the foster care privatization model and contractor performance. Earlier this year, DFPS terminated its largest contract with EMPOWER, following the tragic deaths of two children under its supervision.
The Texas Alliance for Child and Family Services, representing private foster care contractors, did not respond to requests for comment regarding the report.
Marissa Gonzales, a spokesperson for DFPS, indicated that the agency is reviewing the report but had no additional comments at this time.
Advocacy group Building Future Families has long urged lawmakers to establish an ombudsman office to address complaints when the state or its contractors fail to support families adequately. They believe the Legislature should prioritize this issue when it reconvenes in January. Currently, an ombudsman office exists under the Texas Health and Human Services Commission specifically for complaints from foster children.
“Families deserve an independent advocate with the power to turn their concerns into action and hold agencies accountable,” the group stated.
